A government economist in Malaysia is comparing living standards between Malaysia and Singapore using GDP data. Which limitation of GDP would most affect the accuracy of this comparison?

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Question

A government economist in Malaysia is comparing living standards between Malaysia and Singapore using GDP data. Which limitation of GDP would most affect the accuracy of this comparison?

Accepted Answer

GDP does not account for population size differences — Award 1 mark for recognising that GDP per capita is needed for valid comparisons of living standards. B is incorrect — including government spending is appropriate. C is incorrect — market prices are a standard measure. D is incorrect — annual calculation does not affect cross-country comparisons.

Answer

GDP is calculated annually

Answer

GDP measures output at market prices

Answer

GDP does not account for population size differences

Answer

GDP includes government spending

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